Fuel Subsidies Mainly Benefits the Already Well off People in Zambian Society

When international organisations such as World Bank and IMF say that consumptive subsidies mainly benefit the well-off in society at the expense of the poor especially in Sub Sahara Africa, it is interesting to see who stands up to fight against this postulation. It is mainly the well-off beneficiaries.

They fight in the name of defending the poor and how the poor will get suffocated with decimation of the consumptive subsidies. Does it mean World Bank and IMF among other local and international organisations have no understanding of how removing consumptive subsidies will “claim the lives” of the poor in our society? Who are the direct beneficiaries and since when did they get the interest of the poor at heart? And who is a poor person?

They fight in the name of defending the poor and how the poor will get suffocated with decimation of the consumptive subsidies.

Energy Forum Zambia has been tracking down the level of subsidies on fuel and electricity in Zambia. The forum has also been keen to see if the $600m spent in the last year to support electricity and fuel consumers has improved the lives of the poor both in urban and rural areas. The forum collates information from direct engagements, research, annual reports, participation in conferences and publicly available statistics such as those published by the Energy Regulation (ERB), Zambia. The ERB is one of the most organised regulators in the African region based on many facets which include the level of information sharing and industry statistics on their website. In most African countries, it is very hard to get industry statistics and annual reports.

The ERB has on its website national fuel consumption statistics. It lists all registered Oil Marketing Companies (OMCs) and their respective market shares. The website shows where the fuel goes to and in what quantities. Based on this data, it can be inferred who uses a lot of fuel in Zambia and where they are located. It can also be elucidated who consumes much of the electricity in Zambia. Historically, electricity consumption is mainly consumed by corporations which include transnational corporations some of which have tremendous global arbitrage.

While there has been some notable improvement in household electrification, Zambia’s household electrification still remain grievously low at less than 26% of national household. Therefore, the biggest beneficiary of electricity subsidies are the corporations. Whether these corporations or industries in different sizes have the interest of the poor at heart when defending subsidies, the answer is in your heart. You can also compare who is well-off between those few households which are connected to electricity with the over 70% households which are not connected.

With regard to fuel consumption pattern, historically it has been industries which consume more although a strange pattern has of late been emerging. On the Cartesian plane of dualism, the ERB categorizes industries as commercial sector while petrol stations are categorised as retail.

The biggest beneficiary of electricity subsidies are the corporations. Whether these corporations or industries in different sizes have the interest of the poor at heart when defending subsidies, the answer is in your heart.

National fuel consumption between these two sectors is almost neck on neck. This scenario is due to influx of automobiles being imported into Zambia not just at personal level but also due to government, non-governmental and industries procuring more and more automobiles for their operations and personal to holder support. These fuel at petrol stations.

The bigger picture though moderated is that industries still consume more fuel. This being the case, it can be deduced that the biggest beneficiary of fuel subsides in Zambia is the commercial sector which also overlaps into the retail since part of its fleet refuel from petrol stations. This commercial sector includes multinational corporations. Whether these should benefit from consumptive subsidies at both fuel and electricity level, the answer is in your heart.

Energy Forum Zambia maintains the view that consumptive subsidies have an overall benefit on those who are already well-off which include owners of transnational corporations. Unsustainable consumptive subsidies especially for a country still classified as poor are not a panacea to resolving economic challenges. To this end, the forum has welcomed the move by Zambian government to remove the fuel subsidy which was triggered by currency deterioration. The same effort should be exported to electricity sector. The forum also takes note of some concerns and agrees with those concerns that there is a way to keep fuel prices low such as government to government arrangement.

This statement was in a broad sense aimed at highlighting the extent of energy sector subsidies in Zambia. It further sought to highlight who the biggest beneficiaries are and to ignite thought whether the impact of eliminating consumptive subsidies consumed by industries including transnational corporations and certain individuals owning automobiles and living in electrified households has a catastrophic impact on those living on less than a dollar per day-the poor. A further cosine was to invite the reader to gaze into this contentious issue using a prism of the poor and thus gain insight of their feelings regarding how you and me; the few of us have shared the $600m consumptive subsidy in one year.

The Author is Chairperson-Energy Forum Zambia and has an MBA, a Bachelors degree in Mechanical Engineering and is a PhD Candidate.

68 COMMENTS

Is this not the PF thug that week attacked HH claiming there was no electricity and fuel Subsidies that were costing government alot of money.
At times i wonder why some fools even waste time writing articles that we all know are meant to support their jobs. This is the nephew to Alexander Chikwanda who stole millions of US$ from Zambia and made you his relative Board Chairman of INDENI. So just shut up, this hike

The villager who used to send the child to secondary school from the maize produce can no longer afford because transport has gone up, and the other school requirements have equally gone up because every business man has to adjust upwards due to transport costs.

So let us not express opinion type of economics, but its principals when commenting on, or defebding, matters.

Chikwanda just stop from there… Indeed use1ess argument from an educated illiterate. The removal of subsidy from fuel affects everyone (everyone in this context includes the poor). Fuel drives the economy and in fact this increase in fuel pump price is the increase in the cost of every commodity on the market where both the rich and poor buy from. Chikwanda stop behaving behave like a cadre

I’m embarrassed to find myself agreeing with Mushota for a change. Yes so what if you put your qualifications there? Typical African! We have to agree with the tool Chikwanda because he has all these qualifications right?

God can not be mocked, What are you guys in Zambia praying for, You put the wrong guys in power and you want God to make them righteous and able, It does not work like that, Ability to do something is given by God to everyone, weather saved or not, So its up to you Zambians to vote for people who have the ability to do certain things eg run an economy of a country. EL has no ability to run anything you elect him and then ask God to give him the ability to do so, What kind of stu.pidity is this, As the bible says you reap what you sour.

Such a move just ‘chokes’ the poor even more in the absence of a welfare system to support the poor. Removing subsidies does not solve the problem for the poor, it relegates them even further into poverty. The rich will also now have excuses to exploit even more. You are now widening the gap. Western countries can claim to better the system by removing subsidies which benefit the rich more because the poor are supported by the welfare system. Helter-skater decision with little thought on our circumstances.

Is IMF HQ in Samfya or is World bank in Dudumwezi? This govt. is shallow and I ‘ll not recognize it. Author tries to say the commercial sector and poor consumer are almost neck to neck, good analysis. And that’s the point! Don’t pick all that is shoved on us and think it’s right. Our conditions are different. I would supervise the author’s thesis with a view to encourage him to be at the helm one day.

How far will they go telling lies. Now they want us to believe this myth. Its poor people who have to pay high transport costs to get to work, to get to markets to sell their basic goods, to get to hospitals etc…shut up already! Sha!!

Got it wrong Johnstone. The wealthy own the vigayo, buses, etc that sell their products/services to the poor.
At your level you should have argued about how these subsidies have been abused by the managers of the facility who are politicians.
This is the problem we have with our professionals, after so many years in school you end up a kandile.

Maybe I need to be educated here. but what I know is that fuel hikes affected everyone and most especially the poor. This is because it affects everything because almost all goods and services have a transport component in their costs. Just yesterday we heard of how the bus operators were contemplating to increase fares. this will also mean increase in transport costs for even vegetables. If you go to places like Zambezi and Chavuma, prices of commodities are about one and half times those in Kitwe and they say transport increases the cost. I still think it is the rural poor who will suffer more. Most of the well off including ministers use company fuel and therefore won’t be affected much.

nubia, sleeping around to buy new underwear and clothes you cannot afford. Your back must be tired. Live within your means.Just because you service all the PF cadres in the streets to get free rides does not mean other people should sell themselves.

Skewed argument from a compromised elitist with double dealing fingers, desperately trying to, not only protect his current pot of gold, but also grab another one from the government by appearing to be supporting the current illegitimate Government’s myopic policies.

What this PhD candidate forget is that, this is all about disposable income. If the so called Well of Zambians spend less on Fuel, it is a no brainer that they will spread the saving to the poor by either buying goods and services offered by the poor or just sending money to the poor directly. Companies too create jobs and hire the poor if they have disposable income.

This shallow one sided analysis is really dangerous for our country. And which University are you doing your PhD

Is economics a definite science where a given action produces a given outcome? I’ll have to read this article again. I think there is an opportunity here for the young PhD student. I’ll also consult Professor Oliver Saasa and Professor Seshemani.

The above posting was made by mistake by a child, similar to the case of PF Mufulira deputy mayor, Beatrice Bwalya Kapansa, posted a rude pic on whatsApp group.
It was actually supposed to read “We’ve all eaten wembwa we. Were you born yesterday?”. I don’t know how the child turned wembwa to selves! And I am not PF by the way, just a coincidence.

Rubbish and a waste of time this article is Chikwanda. To start with the increment was almost 50%. Only in an African country would you get such a big jump. You can justify the beneficiary as being big companies, reality is the hard hit are the people don’t drive and have no electricity. I don’t need to remind you that IMF and the world bank are not a charity.

It’s the knock on effect that a normal human being should be worried about. Transport costs go up, the price of Tomato goes up, Maize Meal (ubunga) and all. In the mean the salary of that teacher remains the same. Either you are a tool or you’re rich.

How ironic? Here is a ‘well off’ person (to use his words) now telling us subsidies only benefit the well off in society at the expense of the poor, only after a decision has been taken to remove fuel subsidies.
In short as a ‘well off’ person he has been benefiting from fuel subsidies but has he ever stood up and said NO to that benefits?

Is this now the new line they are peddling that us as a poor people will not feel the impact of the increase in fuel pump prices because “we were not beneficiaries anyway”?

In any case I would much rather hear this from anyone else than a man who tried to corrupt a young woman’s morals, and in the holy house of God.

All his claims are correct. The main beneficiaries of fuel and power subsidies are the multinationals. The other beneficiary is the small well off part of Zambians. If the same amount of money was spent on primary and secondary schools and food subsidies, almost all of the subsidies would benefit the poor. Your choice.

YOU ARE A FAKE PHD CANDIDATE. YO ARGUMENT DOESNT HOLD ANY WATER. WHO DO U THNK WILL SAFA B/TWN A POOR AND RICH MAN ECONOMICALLY? JUST ENJOY YO SCHOLARSHIP QUIETLY THAN VOMITING IN PUBLIC LIKE THAT. I DOUBT YO CANDIDATURE BESE YO REASONING IS THAT OF A CADRE WHO THNKS ABOUT 2DAY NOT 2MORO.

I fee the author is an IQ below average. Any removal of subsidies have bigger negative effects on the people without money. Thing that only the people in the villages have no money is a fallacy. transportation costs such as bus fares shall soon increase while cost of the staple food will also go up. DO you think a person with money or a corporation with have any issue with mealie meal fetching 200 Kwacha, no! its the same poor people ultimately suffer. Subsidies is the only way citizens can also ‘enjoy the national cake’ which the politicians abuse.

Dont justify a wrong just because you are among a few Zambians benefiting through corruption. Who said that the socalled majority poor Zambians do not benefit from fuel subsidies? How do they get from one place to another in search for livelihood? Dont you know that Fuel subsidies have kept transport and distribution costs fairly low to the benefit of most the majority of Zambians who do not own a car? Removing subsidies will affect everyone as prices of commodities will go up

The other day I was embarrassed with myself when I looked carefully at a picture of HH in one of his near crying moments. I observed that that apart from HH’s big flat nose, he looked like my big brother. My concern was that people have usually told me that I look like my brother. So I asked myself whether I look like HH then? I must confess that whenever I walk in public places, I look down, rather embarrassed that I may be likened to HH. I am now serious considering procuring a mask to.hide my face. But who would want to be in my shoes when HH has embarrassed himself so much over his cries to be installed in state house outside the ballot?

This is an analytical article! Yes it can draw criticism bcoz we are in a democracy and we have a reason to question anything we don’t agree with! My CONCERN is that WE HAVE NOT YET HEARD OFFICIAL GOVT POSITION ON THIS ISSUE OF PRICE RISE, IS IT JUST THE BEGINNING ALL THE END OF ALL SUBSIDY REMOVAL ON FUEL? Then while Chikwanda,Kavindele et al can explain this to those who read and write,THERE IS NO GOVT.COMMUNICATION MACHINERY to REACH EACH and EVERY ZAMBIA to explain what this whole thing means! But again WHERE IS A GUARANTEE THAT MONEY SO SAVED FROM SUBSIDIES WILL BE USED PRUDENTLY?? Why not REDUCE EMBASSIES and STAFF,DELEGATIONS ON FOREIGN trips to save more money??

The govt is to blame and not Chikwanda. Both Chikwanda and govt have just stated where the problem is but unfortunately have not provided a solution, and that is what has irritated many of you.
If a rich man, instead of paying e.g 10USD pays 5USD, and you a poor Kaponya instead of paying 3USD you pay 5USD, who is benefiting here?
Again, the problem I see here is that Govt is releasing the subsidies without putting in any form of social programs that should compensate for the rise in cost of living as a result. Those programs should benefit some of you bloggers who feel you fall in the category of “poor” people. Please, expect MORE of these to COME. FORCE the govt to speed up the social program else muzanya

I think he is testing his hypothesis for his Phd thesis “fuel subsidies benefit the rich”. May be he should consider reversing the hypothesis and find out how the removal of subsidies will affect the poor, and he should collect his dat from the poor people in the rural areas who don’t have cars. I think it is myopic to think that the only people who buy fuel at the filling station are benefiting from the fuel subsidies. I thought that they said they will remove subsidies gradually. if this is gradual it means we are in for it.

THE PROBLEM WITH ZAMBIAN GOVERNMENT LEADERS IS THAT THEY NEVER HEED TO FREE ADVISE GIVEN TO THEM BY THE CITIZENS. ANYTHING WHICH MAKES CITIZENS PAY MORE IS A NEGATIVE EFFECT ON THE QUALITY OF LIFE BY THE CITIZENS. FUEL PUMP PRICE HIKE WILL HAVE A NEGATIVE IMPACT ON EVERY ZAMBIAN. PLEASE STOP DECORATING OBVIOUSLY BAD SITUATIONS AND TRENDS IN THE COUNTRY.ALL COMMODITY PRICES FOR GOODS AND SERVICES WILL SKY ROCKET AND EFFECT MAINLY THE VULNERABLE MEMBERS OF OUR COMMUNITIES, NOT THE RICH PEOPLE. THIS MOVE TO INCREASE FUEL PRICE IS A MINUS FOR LUNGU.

who is well to do in Zambia? its a small fraction, how will the increase in paraffin affect the rich? Paraffin is mainly used by the poor. Service stations at manda hill, longacres etc don’t even stock it but those along kafue road were most of us stay-misisi, chawama etc. The well to do will be affected by the removal of subsidies-yes i agree but they will not fall below the poverty line, while the middle class will fall to poor and the poor will fall further into abject poverty. So bwana, the subsidies benefit all.

@Steve,
Another way of understanding Chikwanda`s point is that the rich should not benefit from Subsidies, subsidies should only be meant for the poor.
But current status is that its the rich who are benefiting more than the poor. Then the question we should be asking is rather how do we make those “subsidies” targeted to the right beneficiaries, who are the poor people? Unfortunately, the government isn’t doing anything in that direction and the result, is you are crying as you are deprived of that benefit.

Stupidity at its highest… even a grade 2 knows that an increase in fuel results in increases in transport, food, rent and almost everything else. And there are no services/goods reserved for the poor for you to claim that they are not affected. Which institution are you studying your PHD with? Where do you live? How much have you been promised for to auction your integrity in this manner? I would shocked if it were for free.

Mr Chikwanda.. are you sure the poor wont spend more on transport? on bread? on Millie meal? on sugar? on tomato etc? What is in your head today?

I dont thing its right to attack someone personally . what you have to attack is the content of what he has rewritten rationally . what he saying is that maybe 600 dollars half of it goes to people who have ,for me i will not attack him, because i have not donemy own research to dispute his claims. morever, can agree with him on one premise subsidies are but and they are abused.

This is a very misleading and poorly written research article if at all it qualifies as a research paper. Firstly, the author is not giving us the percentages and quantities between the various sectors. Why is he hiding the figures or asking us to check the ERB site? Secondly, he has not given the linkage between cost of production and production levels, or cost of production and employment, or cost of production and prices of goods. The author should have analyzed the various linkages and then draw a conclusion whether it is the well off who benefit or the poor. The author could have also identified various solutions if he thinks the well off are the ones who benefit. In a country with high poverty levels, the rich will pass on the cost to the poor thereby increasing poverty unless govt…

Solar and other renewable sources of energy will go a long way in cost effectiveness as far as electric power is concerned. Bio-fule will also improve cost-benefit situation for petrol and diesel. This is an opportunity to address the real issues. Subsidy or alternatives sources of energy? The answer is diversification into alternative sources of energy.

This is really a warped analysis. The poor are already suffering because of the subsidity removal. Energy is one of the key inputs in any production system. Increase the cost of this input and the output also increases. This relationship is very clear for linear system but we are dealing with a non linear system here. We are talking complex systems here. Chaos.The effect can not be accurately predicted.
To say the poor will benefit from price increase is a fallacy. The major production houses are located in urban areas where the rich live. The poor are in the rural areas and whatever is produced in the urban area has to be transported to these remote areas. A packet of sugar in Lusaka will cost K24, by the time it reaches Chisali will cost K34. How does this price increase benefit…

A packet of sugar in Lusaka will cost K24, by the time it reaches Chisali will cost K34. How does this price increase benefit the poor?

The subsidy on maize was removed during Sata”s time and the story we were told is that the money saved would be used to build roads. How many of these roads did they build using the savings? Zero.

These people should visit the compounds and see how people are suffering. When you go to the markets in the compound you be surprised to find meali meal being repackaged in small packs as small as 100g.You would think it was detergent being sold but no its meali meal. Anyway these are the same people who celebrate the most when bad leaders are elected…

you are right the people in the compounds are suffering big time. i was shocked to find a fist size maize meal packet going for a silver coin. i watched in disbelief as women walked in to buy and hid them in thier vitenges, chaios theory thats really depressed me. so now paraffin has gone up who will be affected more? its the poor in the compounds. The well to do in zambia have huge responcibilities in supporting offans mainly left by the poor relatives in the absence of social wellfare support.

am made to believe that all the trucks that were passing in our country were also buying our subsidized fuel – 77,521 trucks on average, all the Chinese equipment in the construction sector were using our subsidized fuel, all mines owned by foreigners were using our subsidy including the mighty Dangote with his 500 trucks were enjoying our subsidy. lets do simple maths – 500 trucks x 300 litres per day x 11.50 x 15% subsidy x 365 days. it gives me K94.4 million ( 94 billion old currency) for mr Dangote alone. WE REALLY DELAYED TO IMPLEMENT THIS. If there was a way, i could have said we recover the arrears effective January this year and see how the government would easily pay salaries by 9 kuloko tomorro.

The poor can only benefit from the removal of the subsidies if the money is given as household benefits to low income households, then the poor will afford electricity, transport cost and food basket. In other words it’s better to keep the subsidy if you don’t introduce benefits to households with low income.

‘It benefits corporations’ …. Are those corporations’ not taxed or don’t they employ from the poor? If they enjoy subsidies, then even the poor end up enjoying too. So to claim that the poor don’t benefit from the subsidy is wrong.

I DON’T REALLY AGREE WITH THE NOTION THAT SUBSIDIES BENEFIT ONLY THE RICH. THE POOR ARE THE MOST AFFECTED IN THAT THE RICH, WHO IN THIS CASE ARE THE OWNERS OF THE MEANS OF PRODUCTION OR THE OWNERS OF BUSES FOR INSTANCE, DO NOT BEAR THIS BURDEN. THEY WILL PASS ON THE COST TO THE POOR BY INCREASING GOODS OR BUS FARES

This article was written with the assumption that Zambians are dull. I can’t believe that the author could not understand that those with the means of production ( business owners) pass the burden of cost to the final consumer, mainly the poor.
Business has an array of tools to recover the cost. Included in these tools is the tax code that allows business to treat input costs as allowable costs thereby recovered by way of a reduction in profit for tax purposes. In addition, business will also adjust the prices of the final product or service to account for the increase in fuel or electricity.

The poor as the final consumer cannot adjust their own” salaries” or use the tax rules to recover such an increase. They have no such luxuries at their disposal.The absorb the full cost of…

They have no such luxuries at their disposal.The absorb the full cost of the increment in the increased bus fares, increased price of goods etc they now have to pay for.

Here is some of the things that Gvt need to do.

1 Reduce or remove duty on new motor vehicles with less than 2000cc to encourage people to buy new cars that will effectively improve fuel millage and thereby reduce consumption of fuel/ km
2 Introduce a punitive tax on non commercial vehicles that are above 3500 cc.Gase tax
3 Reduce Gvt expenditure by encouraging fuel efficient vehicles for all ministers ect. and not the big V8 engines that they are all driving without shame.
4 Make the Zesco grid intelligent to allow house holds to sell solar to the grid. Thus, elecricity units can be awarded to the meter if at…